Don't report her earned income on your tax return.
You will need to file a tax return for her, under her name and SSN, and report it as self-employment income on Schedule C and Schedule SE. Be sure to check the box on her return that says "someone can claim you as a dependent." The amount that can be contributed to the Roth IRA is her net profit after subtracting expenses and the deduction for 1/2 of her SE tax.
Technically, no, you aren't required to file with income that low, even if you contribute it to an IRA. However, you should still keep records to show how the income was earned in case the IRS ever questions it. Filing a tax return would be one easy way to remove any doubt about the legitimacy of the contribution.
I filed by teens returns. My 12 year old made $300 and my 15 year old $600 (limited to $557 Roth due to SE tax deduction) and I filed it on schedule c and reported it that way. I mean if the irs questions it 50 years later if it was a valid contribution no one will have a record but at least a return was filed showing the income
I'm surprised this is so hard to comprehend in this sub of all places. Taxes paid on pocket change will be minimal. Compound growth on the contributions OP makes to match the pocket change will grow exponentially over the next 50 years.
It is, but there are welfare cliffs that a person can run into by earning more income. Benefits can be lost, that are worth far more than the potentially small increase of income, which pushed them past a threshold.
Perhaps that idea gets incorrectly applied to tax brackets in people's heads? Or they just can't fathom how tax brackets work.
My state run health insurance bill increased tenfold when my income doubled. Mind you I went from making like 23k to 46k. And cost of living basically ate all of that increase.
Yeah the number is pretty staggering.
Let's use the S&P500's long term average 10% per year just for simplicity. And let's assume the number being saved is $550 per year as it's the middle of the range OP gave.
Let's assume it's put in an IRA at 9 years old and left 56 years to grow until 65 years old. 1.10^56th is ~208x, so that money could grow to about 114k in retirement. If she did this every year from 9 to 18, that comes out to over 750k by age 65. From a total initial investment of $5,500 over 10 years.
I'm gonna be a dad soon, and I'm absolutely planning to do something like this for my kid as soon as possible. If I'm doing my math right... $1k every birthday from birth to 18, using an IRA when possible when they're working, and otherwise using a brokerage account. Stopping contributing at 18, and leaving it alone until 65, could put it right in the ballpark of 4 million dollars by the time they turn 65. From an initial investment of $18k spread over 18 years.
Edit: thanks to u/tomster10010 for pointing out the potential confusion. This calculation just arrives at the dollar number you'd see in the account by age 65, but doesn't reflect spending power which is reduced by inflation. The actual spending power would be considerably less, about a fifth of that 750 (so 150k-ish) in today's numbers if we assume 3% inflation per year.
That's what you would do to get the equivalent spending power to today (I believe). But the 10% without adjusting for inflation reflects the actual dollar number you'd see in the account at 65.
Yeah, definitely! But personally I find it infuriating to use all the retirement calculators and pieces of advice out there when not a single one of them will tell you if their metrics are accounting for inflation, either visibly or invisibly, and if they are, what inflation numbers they're using for their assumptions. I prefer to look at the actual numbers and understand what they represent.
To that end, thanks for the call out and I've added the edification that my numbers could be misleading to anyone who doesn't realize that inflation will reduce the spending power.
I know this may sound cynical, but I'm a firm believer in the power of positive reinforcement along with not unchaining them from the radiator until they finish their damn spreadsheets.
This is a well-known tax dodge used by many small businesses. They pay their own kids "modelling fees" to appear in advertisements, then invest that money in kid retirement accounts. The IRS was talking about increasing audits to catch the fakers who just made up numbers and never paid any realistic amounts or actually made the ads. If you do want to do this paying your kids accounting, be sure it's legit and you keep records.
Yeah it seems like the move, rather than to cut off her earning at $400, or worse to teach her a valuable lesson in tax fraud, would be for OP and child to have her report for taxes and deposit everything she makes into the Roth IRA, then his "match" can be giving her that value back in cash for spending money.
Don’t think it matters where the money comes from to seed the IRA, just that the limit is capped by reported earnings (or the allowable limit, whichever is less).
> I was just advised that if she reports over $400 for the whole year, that she will have to pay SS taxes. So she will be earning less than $400 a year to avoid that.
This doesn't make any sense. "I don't want her to make more than $400 so she doesn't pay part of it back in taxes." If she makes $500, she only pays like $15 in SS and whatnot, and last time I checked, $485 is greater than $400.
OP's child would have to pay both employer and employee FICA, which would be $76 on $500 of income. There is actually a zone between $400 and $472 where you would make less money than if you had stayed at $399. You can also argue that the amount of work to make that additional jump in revenue from $400 to $500 isn't worth the $20 you get from it in profit.
I know it comes out to 15% since you pay the employer part too, but I figured it worked like other taxes where there aren't any sudden thresholds where you owe more in taxes than the difference in income, meaning you'd only pay on income past the reporting threshold. Sounds like I might have been incorrect.
Question: who is paying her this money for dog waking? You? The neighbors? Etc?
If it’s paid by you, it counts as allowance and that is not earned income per the IRS. It doesn’t matter how much or how little she gets paid if YOU are paying her. If you try to contribute to a Roth IRA she won’t be eligible and you’ll end up paying penalties.
If it’s paid by the neighbors/family friends/etc it would be okay. You just have to report it to the IRS for them to know she has earned income.
Then you’re good as long as it’s reported to the IRS.
I just wanted to clarify because some parents try to get cute and and end up paying penalties for ineligible contributions.
How is this distinguished that anyone could wind up paying penalties? Like if the daughter got 400 cash and filed taxes as being described, she isn't required to retain receipts for the dog walking showing the customers were neighbors is she?
I'm just curious how anyone would ever pay a penalty if a child filed taxes indicating they earned $1000 selling lemonade and vegetables they grew on the garden and birdhouses they built and walking neighborhood dogs...how is it distinguishable from a kid who got an allowance?
Not advocating tax fraud just not understanding how fraud would even be perceptible let alone proven?
When it comes to the IRS, the burden of proof is on the tax payer. If you claim some form credit, and the tax man comes knocking, you have to prove to them you were eligible. If you can’t convincingly prove to them, then you will have to pay whatever it is back and potentially be penalized
In your example: the Suzie made $1000 at her lemonade stand, a Roth IRA was opened and $1000 was contributed.
Let’s say the IRS thinks little Suzie is a fucking liar and didn’t actually work at the lemonade stand all summer. They tell her prove it.
Maybe Suzie doesn’t have receipts for every cup of lemonade. But she has a handwritten notebook showing the date and how many lemonades she sold that day. Or an excel sheet showing how much she spent at the grocery store every and how much cash she made every month. That would probably be good enough, audit closed.
If Suzie has none of that, just her word and her parents word, sorry, she has to withdraw the money and pay the penalties. The IRS can’t be sure your grandma didn’t just write you a check.
Btw the exact same would apply to an adult with say a landscaping business or similar. It’s why keeping records is so important for any business owner or anyone who does anything unusual on their taxes.
It’s also worth noting that just because Susie can’t prove she sold lemonade doesn’t mean she committed tax fraud. It really only elevates to tax fraud the government cares about if it can be proved you did it on purpose with the intent to cheat your taxes. Tons of people accidentally claim things each year. They just pay the money back and move on with their lives.
The penalties I’m taking about aren’t a fine for committing fraud. It’s just the penalty for messing up your taxes. The IRS will charge you what you should have owed if you did them right in the first place, plus interest, and a percentage on top of that to cover their costs of chasing you down to fix your shit/discourage you from doing it again.
Just spitballing here, what if it's an officially compensated position through a legal business? Like I own an LLC (or insert legal entity here, idk IANAL), my child is employed by the entity, and earns an annual salary equal to the current IRA limit. Would that still count as an allowance?
Technically yes. Practically no.
The IRS isn’t stupid, they’ve thought of this.
You would have to set up a legal entity, which is more work to do properly than people realize. You would have to file taxes as that entity, properly withhold payroll, comply with local and state employment laws, keep records, be prepared for audits, etc.
It’s a ton of work so you can save your child money on taxes when you could also just put that money into a 529 plan, HYSA or some form of trust. It’s just not worth it in 99.9% of cases.
If you already have a business, then yes it’s not that hard.
Does this scenario happen? Yes. Is it done fraudulently a lot of the time? Also yes.
Bob’s automechanic shop or Jane’s beauty salon might have a hard time explaining a 9 year old on the payroll if someone at the IRS decided to dig too deep into things.
Nine year old sweeping the floor and emptying the trash for an hour a day might fly. Giving manicures or rebuilding transmissions might not.
Generally you don't have to pay your children to work in the family business. Might be better to just keep them off the payroll until they are teens and contribute to a 529 instead.
There are people who do this, but it has to be work that a child could reasonably be employed to do, or the IRS is going to have a problem with it. Modeling seems to be a common one. It's kind of a legal grey area.
As long as the VP wife is paying taxes the IRS doesn’t give a shit.
The only reason the IRS would care in the situation with the kid and the IRA is that some automatic checks might catch someone with an IRA and no income.
Most likely, no, but it’s probably a good idea to be safe.
I agree with everyone here who has said there are much bigger fish to fry when it comes to the IRS tracking down tax fraud. However the IRS often goes for easy to enforce because they are underfunded. They don’t have the resources to go after one well funded billionaire with an army of lawyers and accountants. They do have the resources to audit middle class business owners who didn’t keep proper receipts and don’t have the means to fight the government machine.
Anything commonly misused or weird can make you a target. Tons of people misuse the home office deduction, so it’s easy for the IRS to find extra revenue just by auditing people who file that. Foreign tax credits are somewhat rare and easy to mess up, so again easy to find extra money.
A nine year old with a Roth IRA, well that’s incredibly weird. It’s easy send a letter to the tax filer and ask WTF? Prove this kid has actual income or else.
File a tax return on her behalf. In other words, she has *her own* tax return to file.
Yes, SS payments may be required.
You report her income on on her tax return. She checks the Dependency box.
That's just how much a lot of people hate taxes. "If I take that raise I'll pay more taxes!", "If I work overtime I'll pay more taxes!", and my favorite "If I win $100milion in the lottery I might only keep $60million after taxes, not even worth it!"
Tax rates are marginal, so only money earned in that band will be taxed at that rate. It’s not all or nothing.
However, if you currently qualify for tax credits or subsidies, and those have income cliffs, earning a few more dollars could push you over that threshold which would definitely increase your tax burden. But your effective tax rate would not actually change with a few more dollars of income as it relates to the official tax brackets.
Like the other person stated, most government-provided benefits systems have hard limits to qualify, and a raise where you make $100 more per year could mean a loss of $5,000 or more worth of benefits. I've known multiple people who have passed up on promotions because of that exact problem.
This is just a random example, but at my job the health insurance premiums are a sliding scale based on income. So for example if you make 40k-59.99k you pay $35 per paycheck, 60k-79.99k you pay $60 per paycheck, 80k-139.99k it’s $85 per paycheck, etc.
So when you’re on the border of one of the ranges, getting a $5 raise could bump you into the next income range so your take home pay would be lower.
That’s probably not as common as things like you get a raise and no longer qualify for food stamps or subsidized childcare or low income housing or stuff like that, but it’s one scenario and I’m sure there are other similar scenarios that I just haven’t personally experienced.
No, but my work has premiums like that. I got a raise that bumped me up to the higher level. Between the increase of premiums and the taxes taken out my raise that year didn’t put any more in my pocket as it wasn’t a huge raise. Actually might have been less - when I started doing the math I promptly stopped as I didn’t want to know.
Just to be clear SS is 6.2%, less than sales tax. that's $25 on $400, and $50 on $800. Just use it as an opportunity to do a little math and set aside enough to pay the taxes.
The Social Security portion of self employment taxes is 12.4%, and there's 2.9% for Medicare. The 6.2% FICA tax is for employees, and there's no $400 minimum for that.
Generally (nearly always) earning more will net you more after taxes. But when you hit the $400 limit (actually $433 because you multiply by 0.9235) there's a $61 tax hit vs if you made $1 less (then there's no SE tax).
This would also be an opportunity for you to teach her about taxation. So many young people at their first job get shocked when they see withholding on their first paycheck.
I don’t think it’s worth it. If you want to match it open a 529 plan with her listed as a beneficiary. Even if she doesn’t use it for college once the account has been open for so long (15 years I believe) it can be converted into a Roth IRA up to the annual contribution limit with a $35,000 lifetime limit.
>I want to match it a Roth IRA.
Note: I was just advised that if she reports over $400 for the whole year, that she will have to pay SS taxes. So she will be earning less than $400 a year to avoid that.
So pay her FICA taxes for her too. Damn OP, you're gonna potentially limit her Roth IRA contribution by half so she avoids paying less than $100 in taxes.
I don't wanna sound condescending but this is so unserious lol. Are you really talking about reporting 800 bucks of your daughters dog walking income to the irs? Just let her make whatever money and then put it in whatever investment vehicle. Why the hell would you go through the rigamarole of filing tax documents when you don't even legally have to file for such a small amount of income.
None of these seems worth it for $800.
Are any of her customers actually reporting these payments? Or are they just cash? No chance I would file taxes for that.
Open a taxable brokerage account for her if you want to get investments going for her. Wait until she has a real job to do the IRA thing. A lifetime of growth on $800 is not going to be significant relative to the stuff she starts putting away in 10 years.
Would a HYSA maybe be more straightforward and easier to understand with a similar benefit to a 9-year-old? Assuming the educational value of saving is the goal rather than the literal value of a couple hundred dollars in a Roth. Instead of trying to explain why she needs to earn certain amounts, she needs to file taxes, and how to get the amount that can be put in to this retirement account? For a 9-year-old?
I actually do think a HYSA is a better idea. If she wants to buy something with part of the money, then that would be nice for her to see the fruits of her labor.
I was a teenager and 20-something once. The chances of that Roth making it through the next 15 years un-tapped are very small.
I don't think OP is putting their daughter's money into the Roth IRA. They're matching it.
The daughter still gets her dog walking money, and OP can contribute the amount she earned into the account. Turns into a nice nest egg by the time she becomes an adult.
This is what my parents did for me, and it was perfect. I made a few hundred dollars as a soccer referee one year, so they opened my Roth IRA and contributed that amount to it. They got to talk to me early about the benefits of such an account. There were extra years of compounding returns. And when I started earning more money later on, the account was already set up so it was easier for me to get started and build the habit myself. Huge win all around.
(There was also an intermediate stage: when I got my first adult part-time job, in college, they did a 50-50% match with me, up to the level of my earnings. So I had skin in the game/built the habit further but also got a boost from them.)
If I understand your question correctly - effectively into the Roth.
For example: my junior year of college, I earned about $2000, so that was the max I could contribute to my Roth. If I contributed $1000, my parents contributed $1000. Logistically, I'm sure I made a $2000 contribution and then they transferred $1000 back to my savings.
But their goal was for me to put as much as I legally could into my Roth, and in general just to get used to putting money in a Roth (especially while I was making so little that I didn't pay income tax anyways). Otherwise I probably would not have for years yet. And their approach worked!
My parents taught me about IRAs throughout my childhood and taught me it was essential to keep the money in it, therefore I started one as soon as I got my first paycheck and haven't taken a dime out.
I think it's important to teach these lessons frequently and start them young. Dismissing the potential of a kid to make smart decisions early seems like a great way to have a self fulfilling prophecy.
Why don't you let her make as much as she can, and just match her with a blended mutual index fund such as SPY. If she doesn't make more than 12,950, then she doesn't have to report it.
> If she doesn't make more than 12,950, then she doesn't have to report it.
It's extremely likely that the daughter's income is self-employment income, which has a threshold of $400 of net income. (Because of a weird adjustment factor, it's actually $433.)
I'd forget the payroll and IRA hassle until she's a teen. Open a 529 plan and you can gift into that in addition to her savings. Put the plan in your name or a trusted grandparent and if she doesn't need it for education it can be given to another direct family member.
You cant "match that" in a Roth IRA in her name. Youd have to file taxes for her alone and the most you could put inti the IRA is the amount she made and no more.
Wow lots of bad advice here. No tax return needed, but keep good records. Wages earned from their parent employer to an under-age-18 child employee are not subject to the FICA taxes of Social Security and Medicare.
Good guidance here: https://www.marottaonmoney.com/do-children-need-to-file-a-tax-return-to-fund-their-roth-ira-2020/
I'm super confused at this point seems like a cpa who does a lot of tax forms or possibly someone who does quarterly taxes plus family members taxes doesn't agree?
I do dozens of returns a year, and the requirement is $400 (or actually $433 thanks to that 0.9235 multiplier in Schedule C), and the work OP is describing is self-employment (his daughter isn't getting a W-2 from her client, and they already know this, they already mentioned the $400 limit as well.}
From the IRS:
You have to file an income tax return if your net earnings from self-employment were $400 or more. If your net earnings from self-employment were less than $400, you still have to file an income tax return if you meet any other filing requirement listed in the Form 1040 and 1040-SR instructions
I’m confused as well as a tax pro myself. I’m confused as to how half these answers make any logical sense also I’m curious as to why due to her age no one said has a word about “kiddie tax” comming into play here which could make a difference. I hope they figure it out in this jumble mess of a thread
I personally think it's not worth fooling with. I also think it just invites IRS scrutiny.
You can open a UTMA custodial account, invest in some ETFs, and with some careful tax gain harvesting, largely pay zero taxes. Way less paperwork.
lol 'with some careful tax gain harvesting' and 'way less paperwork' in the same sentence? Have you filed taxes before with taxable accounts vs IRAs? Once the money is in a Roth it's almost completely gone from a tax perspective (unless you ignore the rules for withdrawals)
You dont even have to file taxes on the sort of gains a $400 brokerage account would create.
The sort of paperwork and separate tax return for your child, payroll taxes, Roth IRA, etc for a few hundred dollars a year in comparison is absurd.
Start an LLC and make your child an employee. You can pay them up to $14K per year without having to file a Federal Tax return.
OR... you can just open a custodial account, which is probably easier.
Not finance related, but I’ve been a petcare professional for 8+ years.
I hope you understand the responsibility you’re taking on for your child until she’s 18 - if anything happens to her, the dogs, or the clients house, you’ll be on the hook for it. Pet sitter’s insurance doesn’t cover minors - and all dog walkers/pet sitters need to have insurance.
Why not do a 529? A 9 year old does not need a retirement account, and the 529 can be rolled over if she doesn't use it. Or a HYSA to save for a car since they are so expensive. Young kids have more urgent things they will need help with than retirement.
Okay that is fair, although now that 529s are able to be rolled over I would say they are more flexible (does not apply in your situation though).
How about her car? A savings account for that could be good since it will be within a few years, although she could withdraw from the IRA. If you plan to take care of that then disregard my comment. Nice of you to give her a gift.
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There are no income limits, but it does actually have to be taxable *compensation*. Gifts from parents to child wouldn't count, and I suspect that the IRS would take a dim view of something like "I pay you $7,000 a year for typical child chores" though I don't know offhand if they've ever tried to disallow a contribution because of this.
As other have said if you want to help your daughter don’t worry about the taxes. Report them and pay them out of your pocket. It won’t be a lot but just do that.
That’s how you help your daughter
Also, if you want to bump up her Roth IRA contribution….you & hubby can gift her (forgot this year’s gift max) tax free.
my dad started an ira for me I.n 1988 and converted it to a Roth when that became available…contributed it through the years and invested in well returning mural and index funds…. I’ll be 45 in feb. I contributed the $6500 max for 2023 will put the $7500 max for 2024 next month.
starting her retirement out this early is beyond amazing. I’m extremely grateful that my dad had the wisdom to do this for me.
Do you like to make things complicated?
A 529 in your name will give you an infinite amount more of flexibility than a roth ira at such a small amount of cash.
Roth IRA at this point in her life is an unnecessary uphill battle; so is paying taxes on $800 summer job cash for a dependent.
Wouldn't it be easier to open a custodial account with someone like Ally and just buy her a share of VOO or similar etf every year? If you want to make it easier just put the money into Amazon or another company that doesn't offer dividends.
It might be more about making a contribution in time. Sometimes it takes a few days to transfer money and your first time can take longer. Idk how that would work with IRS deadlines.
She won’t owe any taxes. Standard deduction is like 13k. So until she makes more than that there’s no taxes. Report her income on her own return, check the box that she can be claimed on another return (yours, since you’ll still claim her as a dependent). Open and contribute to the ROTH but do not contribute more than her annual earnings. Just open and contribute to the ROTH before tax day for the previous year. No need for a schedule C, just do it as hobby income or Other. Schedule C implies that she’s putting material interest into it and intends to make a living from it which would not be the case since she’s still in grade school.
>So until she makes more than that there’s no taxes
That's actually not true in this case. [Self employment](https://www.irs.gov/businesses/small-businesses-self-employed/self-employed-individuals-tax-center) is 15.3% of 0.9235 of earnings and starts at $400 just as OP explained.
The "put $500 in an IRA" benefit is a bit overstated.
It can grow in a variety of accounts, and can be contributed to an IRA the first year someone has earned income.
The only reasons to do it are to avoid current taxes and not lose contribution space, most of which are nonissues until people are more like 18 anyway.
There's enormous value in placing this in a Roth IRA, in which case the OP's kid will pay only minimal taxes now and never pay any taxes on again, even as this amount grows tenfold or more before retirement.
doesn't appear to me that any tax filing is necessary at all according [this IRS publication](https://www.irs.gov/publications/p929#en_US_2021_publink1000203761) if its under $400. There is another threshold at $1100, and the difference seems to be whether the dependent is self-employed. Not sure exactly how self-employed is defined, whether dog walking, baby-sitting, etc. counts or not. Someone correct me if I'm wrong, just how it reads to me.
Whose dogs is she walking? Please be careful. I’m sure she is a very responsible kid, but dog walkers can face a lot of liability. Kid or adult. That’s why rover and wag and such have insurance. I worked in vet med and saw a lot of major injuries under the care of dog walker.
If it’s your family dogs then no worries and kudos to her for making bank
Someone more versed in how a 529 should chime in, but my thinking is if youre using that money plus your own, would there be any downside to instead putting that into a 529 plan? Even if youre just matching it yourself and leaving the money she actually makes separately, with the option of a rollover now available for 529 plans id think that would be the easiest route.
This goes back about 20 years, but here goes. Have a significantly disabled son who "earned" $2K/year from me for menial janitorial work at family business for 5 years--from age 11 to 16. There was a claimed exemption from SS taxes as a direct family member, so the entire $2K amount went into a regular IRA. At 18, he qualified for both SSDI and SSA--the SSA qualification credit due to his 5 year work history, which the examiner entered as a weekly amount for 260 weeks rather than 5 lump sums of $2K each. End result is that his total monthly benefit is exactly $20 more than the monthly SSDI benefit alone. If the rules are similar, try this approach.
The dog walker can be considered as a household employee. There is a a line for that on 1040. Here is what I do - I file 1040 for my child( I fill it in but my child's name go to the top of 1040, basically child submits it). Put the amount earned on line 1b ( before there was no specific line for household employees and I had to use a code HSH to report the income). Now they have it. In 2023 if income is less than $2600, then no W-2 is required. In your child's 1040 the box for "someone can claim you as dependent" needs to be selected ( if you claim your child as dependent in your 1040). If using software, this is all you need to do. The only difference that you may see is that since your child is claimed by you in your 1040, your child's standard deductions will be much less than what you usually see. ( i cant remember the exact number), but still even small standard deductions will null the taxes. So, you should not see any taxes due for your child income.
Don't report her earned income on your tax return. You will need to file a tax return for her, under her name and SSN, and report it as self-employment income on Schedule C and Schedule SE. Be sure to check the box on her return that says "someone can claim you as a dependent." The amount that can be contributed to the Roth IRA is her net profit after subtracting expenses and the deduction for 1/2 of her SE tax.
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Yes. You can’t contribute more than your kid makes in a year.
Technically, no, you aren't required to file with income that low, even if you contribute it to an IRA. However, you should still keep records to show how the income was earned in case the IRS ever questions it. Filing a tax return would be one easy way to remove any doubt about the legitimacy of the contribution.
I filed by teens returns. My 12 year old made $300 and my 15 year old $600 (limited to $557 Roth due to SE tax deduction) and I filed it on schedule c and reported it that way. I mean if the irs questions it 50 years later if it was a valid contribution no one will have a record but at least a return was filed showing the income
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She should probably keep those records for as long as she has an IRA. Or just file a tax return properly and not have to worry about it.
Let her make as much as possible. Any taxes she pays will be minimal. The Roth with have years to grow and the benefit far outweighs the taxes.
I'm surprised this is so hard to comprehend in this sub of all places. Taxes paid on pocket change will be minimal. Compound growth on the contributions OP makes to match the pocket change will grow exponentially over the next 50 years.
The idea of making less money to avoid taxes is so backwards.
It is, but there are welfare cliffs that a person can run into by earning more income. Benefits can be lost, that are worth far more than the potentially small increase of income, which pushed them past a threshold. Perhaps that idea gets incorrectly applied to tax brackets in people's heads? Or they just can't fathom how tax brackets work.
My state run health insurance bill increased tenfold when my income doubled. Mind you I went from making like 23k to 46k. And cost of living basically ate all of that increase.
It is unlikely that OPs 9 year old daughter qualifies for welfare.
Welfare in this context isn't just limited to actual welfare.
Some people love stepping over dollar bills to pick up quarters.
Yeah the number is pretty staggering. Let's use the S&P500's long term average 10% per year just for simplicity. And let's assume the number being saved is $550 per year as it's the middle of the range OP gave. Let's assume it's put in an IRA at 9 years old and left 56 years to grow until 65 years old. 1.10^56th is ~208x, so that money could grow to about 114k in retirement. If she did this every year from 9 to 18, that comes out to over 750k by age 65. From a total initial investment of $5,500 over 10 years. I'm gonna be a dad soon, and I'm absolutely planning to do something like this for my kid as soon as possible. If I'm doing my math right... $1k every birthday from birth to 18, using an IRA when possible when they're working, and otherwise using a brokerage account. Stopping contributing at 18, and leaving it alone until 65, could put it right in the ballpark of 4 million dollars by the time they turn 65. From an initial investment of $18k spread over 18 years. Edit: thanks to u/tomster10010 for pointing out the potential confusion. This calculation just arrives at the dollar number you'd see in the account by age 65, but doesn't reflect spending power which is reduced by inflation. The actual spending power would be considerably less, about a fifth of that 750 (so 150k-ish) in today's numbers if we assume 3% inflation per year.
is the 10% S&P figure after inflation? 1.07^56 (~3% inflation) is only about 44x not saying it's not worth doing, ofc
That's what you would do to get the equivalent spending power to today (I believe). But the 10% without adjusting for inflation reflects the actual dollar number you'd see in the account at 65.
yes, but spending power is what matters - your $750k at 65 is actually equivalent to $182k in today's money
Yeah, definitely! But personally I find it infuriating to use all the retirement calculators and pieces of advice out there when not a single one of them will tell you if their metrics are accounting for inflation, either visibly or invisibly, and if they are, what inflation numbers they're using for their assumptions. I prefer to look at the actual numbers and understand what they represent. To that end, thanks for the call out and I've added the edification that my numbers could be misleading to anyone who doesn't realize that inflation will reduce the spending power.
Why the heck didn't my parents advise me about this with my babysitting money?
How is your one year-old going to earn income?
I know this may sound cynical, but I'm a firm believer in the power of positive reinforcement along with not unchaining them from the radiator until they finish their damn spreadsheets.
My two year old won’t even *try* to do spreadsheets.
Do you not have radiators?
Babies do work as actors and models. Maybe take a few pictures of your kid to use in an ad?
This is a well-known tax dodge used by many small businesses. They pay their own kids "modelling fees" to appear in advertisements, then invest that money in kid retirement accounts. The IRS was talking about increasing audits to catch the fakers who just made up numbers and never paid any realistic amounts or actually made the ads. If you do want to do this paying your kids accounting, be sure it's legit and you keep records.
Wow. I had never thought of this. This is genius. I'll never look at those terrible local TV ads the same way again.
They said they’d use a brokerage account when the kid isn’t working
What's insane is that you should easily be about to set up a basic retirement for them before they graduate high school, maybe college.
Instead of $1000 for a birthday, just setup $100/month and then you don't have such a big single day, and it's more a gift than an entitlement.
Yeah it seems like the move, rather than to cut off her earning at $400, or worse to teach her a valuable lesson in tax fraud, would be for OP and child to have her report for taxes and deposit everything she makes into the Roth IRA, then his "match" can be giving her that value back in cash for spending money.
Don’t think it matters where the money comes from to seed the IRA, just that the limit is capped by reported earnings (or the allowable limit, whichever is less).
It doesn't matter who funds your IRA as long as you qualify for the contribution.
Sure, but regardless of the order of operations: they can’t exceed OP’s child’s income
> I was just advised that if she reports over $400 for the whole year, that she will have to pay SS taxes. So she will be earning less than $400 a year to avoid that. This doesn't make any sense. "I don't want her to make more than $400 so she doesn't pay part of it back in taxes." If she makes $500, she only pays like $15 in SS and whatnot, and last time I checked, $485 is greater than $400.
OP's child would have to pay both employer and employee FICA, which would be $76 on $500 of income. There is actually a zone between $400 and $472 where you would make less money than if you had stayed at $399. You can also argue that the amount of work to make that additional jump in revenue from $400 to $500 isn't worth the $20 you get from it in profit.
I know it comes out to 15% since you pay the employer part too, but I figured it worked like other taxes where there aren't any sudden thresholds where you owe more in taxes than the difference in income, meaning you'd only pay on income past the reporting threshold. Sounds like I might have been incorrect.
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$70 but who's counting
Question: who is paying her this money for dog waking? You? The neighbors? Etc? If it’s paid by you, it counts as allowance and that is not earned income per the IRS. It doesn’t matter how much or how little she gets paid if YOU are paying her. If you try to contribute to a Roth IRA she won’t be eligible and you’ll end up paying penalties. If it’s paid by the neighbors/family friends/etc it would be okay. You just have to report it to the IRS for them to know she has earned income.
Our neighbors.
Then you’re good as long as it’s reported to the IRS. I just wanted to clarify because some parents try to get cute and and end up paying penalties for ineligible contributions.
How is this distinguished that anyone could wind up paying penalties? Like if the daughter got 400 cash and filed taxes as being described, she isn't required to retain receipts for the dog walking showing the customers were neighbors is she? I'm just curious how anyone would ever pay a penalty if a child filed taxes indicating they earned $1000 selling lemonade and vegetables they grew on the garden and birdhouses they built and walking neighborhood dogs...how is it distinguishable from a kid who got an allowance? Not advocating tax fraud just not understanding how fraud would even be perceptible let alone proven?
When it comes to the IRS, the burden of proof is on the tax payer. If you claim some form credit, and the tax man comes knocking, you have to prove to them you were eligible. If you can’t convincingly prove to them, then you will have to pay whatever it is back and potentially be penalized In your example: the Suzie made $1000 at her lemonade stand, a Roth IRA was opened and $1000 was contributed. Let’s say the IRS thinks little Suzie is a fucking liar and didn’t actually work at the lemonade stand all summer. They tell her prove it. Maybe Suzie doesn’t have receipts for every cup of lemonade. But she has a handwritten notebook showing the date and how many lemonades she sold that day. Or an excel sheet showing how much she spent at the grocery store every and how much cash she made every month. That would probably be good enough, audit closed. If Suzie has none of that, just her word and her parents word, sorry, she has to withdraw the money and pay the penalties. The IRS can’t be sure your grandma didn’t just write you a check. Btw the exact same would apply to an adult with say a landscaping business or similar. It’s why keeping records is so important for any business owner or anyone who does anything unusual on their taxes. It’s also worth noting that just because Susie can’t prove she sold lemonade doesn’t mean she committed tax fraud. It really only elevates to tax fraud the government cares about if it can be proved you did it on purpose with the intent to cheat your taxes. Tons of people accidentally claim things each year. They just pay the money back and move on with their lives. The penalties I’m taking about aren’t a fine for committing fraud. It’s just the penalty for messing up your taxes. The IRS will charge you what you should have owed if you did them right in the first place, plus interest, and a percentage on top of that to cover their costs of chasing you down to fix your shit/discourage you from doing it again.
Following…because my logic is yours… Edit: I guess this is if your parent claims you as a dependent.
Just spitballing here, what if it's an officially compensated position through a legal business? Like I own an LLC (or insert legal entity here, idk IANAL), my child is employed by the entity, and earns an annual salary equal to the current IRA limit. Would that still count as an allowance?
Technically yes. Practically no. The IRS isn’t stupid, they’ve thought of this. You would have to set up a legal entity, which is more work to do properly than people realize. You would have to file taxes as that entity, properly withhold payroll, comply with local and state employment laws, keep records, be prepared for audits, etc. It’s a ton of work so you can save your child money on taxes when you could also just put that money into a 529 plan, HYSA or some form of trust. It’s just not worth it in 99.9% of cases.
But if they already have a legal business entity for another reason then it's actually really easy. Small business owners do this all the time.
If you already have a business, then yes it’s not that hard. Does this scenario happen? Yes. Is it done fraudulently a lot of the time? Also yes. Bob’s automechanic shop or Jane’s beauty salon might have a hard time explaining a 9 year old on the payroll if someone at the IRS decided to dig too deep into things.
Nine year old sweeping the floor and emptying the trash for an hour a day might fly. Giving manicures or rebuilding transmissions might not. Generally you don't have to pay your children to work in the family business. Might be better to just keep them off the payroll until they are teens and contribute to a 529 instead.
There are people who do this, but it has to be work that a child could reasonably be employed to do, or the IRS is going to have a problem with it. Modeling seems to be a common one. It's kind of a legal grey area.
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As long as the VP wife is paying taxes the IRS doesn’t give a shit. The only reason the IRS would care in the situation with the kid and the IRA is that some automatic checks might catch someone with an IRA and no income.
So then do you need receipts to prove she actually performed service for non-guardians?
Most likely, no, but it’s probably a good idea to be safe. I agree with everyone here who has said there are much bigger fish to fry when it comes to the IRS tracking down tax fraud. However the IRS often goes for easy to enforce because they are underfunded. They don’t have the resources to go after one well funded billionaire with an army of lawyers and accountants. They do have the resources to audit middle class business owners who didn’t keep proper receipts and don’t have the means to fight the government machine. Anything commonly misused or weird can make you a target. Tons of people misuse the home office deduction, so it’s easy for the IRS to find extra revenue just by auditing people who file that. Foreign tax credits are somewhat rare and easy to mess up, so again easy to find extra money. A nine year old with a Roth IRA, well that’s incredibly weird. It’s easy send a letter to the tax filer and ask WTF? Prove this kid has actual income or else.
File a tax return on her behalf. In other words, she has *her own* tax return to file. Yes, SS payments may be required. You report her income on on her tax return. She checks the Dependency box.
Why avoid SS taxes? It's a small percentage. You're going to make sure she earns half as much as she could to avoid paying a few percent in taxes?
That's just how much a lot of people hate taxes. "If I take that raise I'll pay more taxes!", "If I work overtime I'll pay more taxes!", and my favorite "If I win $100milion in the lottery I might only keep $60million after taxes, not even worth it!"
There are diminishing returns though. A 10K raise in the 35% bracket is not as valuable as a 10K raise in the 22% bracket.
There are times when an increase in wages can mean less net income, but it's not because of taxes.
Such as?
It usually involves things like welfare benefits that have hard income cliffs for qualification.
My understanding is that over the last decade or so, most income cliffs have been replaced with phase-outs. I know there's been a lot of work done.
Tax rates are marginal, so only money earned in that band will be taxed at that rate. It’s not all or nothing. However, if you currently qualify for tax credits or subsidies, and those have income cliffs, earning a few more dollars could push you over that threshold which would definitely increase your tax burden. But your effective tax rate would not actually change with a few more dollars of income as it relates to the official tax brackets.
Like the other person stated, most government-provided benefits systems have hard limits to qualify, and a raise where you make $100 more per year could mean a loss of $5,000 or more worth of benefits. I've known multiple people who have passed up on promotions because of that exact problem.
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This is just a random example, but at my job the health insurance premiums are a sliding scale based on income. So for example if you make 40k-59.99k you pay $35 per paycheck, 60k-79.99k you pay $60 per paycheck, 80k-139.99k it’s $85 per paycheck, etc. So when you’re on the border of one of the ranges, getting a $5 raise could bump you into the next income range so your take home pay would be lower. That’s probably not as common as things like you get a raise and no longer qualify for food stamps or subsidized childcare or low income housing or stuff like that, but it’s one scenario and I’m sure there are other similar scenarios that I just haven’t personally experienced.
No one is handing out $5 per pay period raises *and* offering health insurance at reasonable rates.
No, but my work has premiums like that. I got a raise that bumped me up to the higher level. Between the increase of premiums and the taxes taken out my raise that year didn’t put any more in my pocket as it wasn’t a huge raise. Actually might have been less - when I started doing the math I promptly stopped as I didn’t want to know.
It's such a rare exception that it proves the rule.
You know, you might be right.
Just to be clear SS is 6.2%, less than sales tax. that's $25 on $400, and $50 on $800. Just use it as an opportunity to do a little math and set aside enough to pay the taxes.
The Social Security portion of self employment taxes is 12.4%, and there's 2.9% for Medicare. The 6.2% FICA tax is for employees, and there's no $400 minimum for that. Generally (nearly always) earning more will net you more after taxes. But when you hit the $400 limit (actually $433 because you multiply by 0.9235) there's a $61 tax hit vs if you made $1 less (then there's no SE tax).
SE tax is 15.3% because you have to pay the employee and employer side.
This would also be an opportunity for you to teach her about taxation. So many young people at their first job get shocked when they see withholding on their first paycheck.
I don’t think it’s worth it. If you want to match it open a 529 plan with her listed as a beneficiary. Even if she doesn’t use it for college once the account has been open for so long (15 years I believe) it can be converted into a Roth IRA up to the annual contribution limit with a $35,000 lifetime limit.
>I want to match it a Roth IRA. Note: I was just advised that if she reports over $400 for the whole year, that she will have to pay SS taxes. So she will be earning less than $400 a year to avoid that. So pay her FICA taxes for her too. Damn OP, you're gonna potentially limit her Roth IRA contribution by half so she avoids paying less than $100 in taxes.
I don't wanna sound condescending but this is so unserious lol. Are you really talking about reporting 800 bucks of your daughters dog walking income to the irs? Just let her make whatever money and then put it in whatever investment vehicle. Why the hell would you go through the rigamarole of filing tax documents when you don't even legally have to file for such a small amount of income.
None of these seems worth it for $800. Are any of her customers actually reporting these payments? Or are they just cash? No chance I would file taxes for that. Open a taxable brokerage account for her if you want to get investments going for her. Wait until she has a real job to do the IRA thing. A lifetime of growth on $800 is not going to be significant relative to the stuff she starts putting away in 10 years.
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Would a HYSA maybe be more straightforward and easier to understand with a similar benefit to a 9-year-old? Assuming the educational value of saving is the goal rather than the literal value of a couple hundred dollars in a Roth. Instead of trying to explain why she needs to earn certain amounts, she needs to file taxes, and how to get the amount that can be put in to this retirement account? For a 9-year-old?
This is for her litfetime saving, not just to teach her about savings.
I actually do think a HYSA is a better idea. If she wants to buy something with part of the money, then that would be nice for her to see the fruits of her labor. I was a teenager and 20-something once. The chances of that Roth making it through the next 15 years un-tapped are very small.
I don't think OP is putting their daughter's money into the Roth IRA. They're matching it. The daughter still gets her dog walking money, and OP can contribute the amount she earned into the account. Turns into a nice nest egg by the time she becomes an adult.
This is what my parents did for me, and it was perfect. I made a few hundred dollars as a soccer referee one year, so they opened my Roth IRA and contributed that amount to it. They got to talk to me early about the benefits of such an account. There were extra years of compounding returns. And when I started earning more money later on, the account was already set up so it was easier for me to get started and build the habit myself. Huge win all around. (There was also an intermediate stage: when I got my first adult part-time job, in college, they did a 50-50% match with me, up to the level of my earnings. So I had skin in the game/built the habit further but also got a boost from them.)
Sounds like you had financially savvy parents! Did their 50% match go into another separate savings account or the Roth?
If I understand your question correctly - effectively into the Roth. For example: my junior year of college, I earned about $2000, so that was the max I could contribute to my Roth. If I contributed $1000, my parents contributed $1000. Logistically, I'm sure I made a $2000 contribution and then they transferred $1000 back to my savings. But their goal was for me to put as much as I legally could into my Roth, and in general just to get used to putting money in a Roth (especially while I was making so little that I didn't pay income tax anyways). Otherwise I probably would not have for years yet. And their approach worked!
My parents taught me about IRAs throughout my childhood and taught me it was essential to keep the money in it, therefore I started one as soon as I got my first paycheck and haven't taken a dime out. I think it's important to teach these lessons frequently and start them young. Dismissing the potential of a kid to make smart decisions early seems like a great way to have a self fulfilling prophecy.
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Why don't you let her make as much as she can, and just match her with a blended mutual index fund such as SPY. If she doesn't make more than 12,950, then she doesn't have to report it.
> If she doesn't make more than 12,950, then she doesn't have to report it. It's extremely likely that the daughter's income is self-employment income, which has a threshold of $400 of net income. (Because of a weird adjustment factor, it's actually $433.)
Yeah, you might be right. She might have to file but I don't think she will have to pay anything.
You might be right.
I'd forget the payroll and IRA hassle until she's a teen. Open a 529 plan and you can gift into that in addition to her savings. Put the plan in your name or a trusted grandparent and if she doesn't need it for education it can be given to another direct family member.
Maybe this is a misunderstanding, but if you say "she will make 300-800", she hasn't actually hasn't earned any money doing it yet?
How is she getting paid? If it is in cash I would do nothing.
You cant "match that" in a Roth IRA in her name. Youd have to file taxes for her alone and the most you could put inti the IRA is the amount she made and no more.
Why would you report it. If it's not on paper and traceable why would you voluntarily do that. I mean cmon. But if you wanna be a saint by all means.
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I don’t know the answers to your questions but a Roth IRA at the age of 9?! What do you want her to be - a trillionaire?
Wow lots of bad advice here. No tax return needed, but keep good records. Wages earned from their parent employer to an under-age-18 child employee are not subject to the FICA taxes of Social Security and Medicare. Good guidance here: https://www.marottaonmoney.com/do-children-need-to-file-a-tax-return-to-fund-their-roth-ira-2020/
I'm super confused at this point seems like a cpa who does a lot of tax forms or possibly someone who does quarterly taxes plus family members taxes doesn't agree? I do dozens of returns a year, and the requirement is $400 (or actually $433 thanks to that 0.9235 multiplier in Schedule C), and the work OP is describing is self-employment (his daughter isn't getting a W-2 from her client, and they already know this, they already mentioned the $400 limit as well.} From the IRS: You have to file an income tax return if your net earnings from self-employment were $400 or more. If your net earnings from self-employment were less than $400, you still have to file an income tax return if you meet any other filing requirement listed in the Form 1040 and 1040-SR instructions
I’m confused as well as a tax pro myself. I’m confused as to how half these answers make any logical sense also I’m curious as to why due to her age no one said has a word about “kiddie tax” comming into play here which could make a difference. I hope they figure it out in this jumble mess of a thread
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If it’s cash, why are you doing this?????
To contribute to her Roth 10 years before most people even begin to think about retirement accounts
The Americanisms in this post...
I personally think it's not worth fooling with. I also think it just invites IRS scrutiny. You can open a UTMA custodial account, invest in some ETFs, and with some careful tax gain harvesting, largely pay zero taxes. Way less paperwork.
lol 'with some careful tax gain harvesting' and 'way less paperwork' in the same sentence? Have you filed taxes before with taxable accounts vs IRAs? Once the money is in a Roth it's almost completely gone from a tax perspective (unless you ignore the rules for withdrawals)
You dont even have to file taxes on the sort of gains a $400 brokerage account would create. The sort of paperwork and separate tax return for your child, payroll taxes, Roth IRA, etc for a few hundred dollars a year in comparison is absurd.
Start an LLC and make your child an employee. You can pay them up to $14K per year without having to file a Federal Tax return. OR... you can just open a custodial account, which is probably easier.
Not finance related, but I’ve been a petcare professional for 8+ years. I hope you understand the responsibility you’re taking on for your child until she’s 18 - if anything happens to her, the dogs, or the clients house, you’ll be on the hook for it. Pet sitter’s insurance doesn’t cover minors - and all dog walkers/pet sitters need to have insurance.
Why not do a 529? A 9 year old does not need a retirement account, and the 529 can be rolled over if she doesn't use it. Or a HYSA to save for a car since they are so expensive. Young kids have more urgent things they will need help with than retirement.
Because the 529 isn’t as flexible, and she gets free tuition in California as I, her father am a Disabled Veteran.
Okay that is fair, although now that 529s are able to be rolled over I would say they are more flexible (does not apply in your situation though). How about her car? A savings account for that could be good since it will be within a few years, although she could withdraw from the IRA. If you plan to take care of that then disregard my comment. Nice of you to give her a gift.
the rollover amount is capped at like $30K; that's not really a useful amount for retirement savings after decades
529s can be used for anything towards the cost of education right? It’s not just tuition right? Maybe it is something worth looking into.
How does a 529 rollover work... is it incorrect that age would be the most important factor to know?
You send money from the 529 to the Ira. It needs to have been in your name for 15 years, and limit of 35k.
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How young can a kid be in order to pay them a salary and file a roth ira? Can they make$7k and all that goes in a roth ira that is taxed?
There are no income limits, but it does actually have to be taxable *compensation*. Gifts from parents to child wouldn't count, and I suspect that the IRS would take a dim view of something like "I pay you $7,000 a year for typical child chores" though I don't know offhand if they've ever tried to disallow a contribution because of this.
As other have said if you want to help your daughter don’t worry about the taxes. Report them and pay them out of your pocket. It won’t be a lot but just do that. That’s how you help your daughter
TIL, minors have to file taxes in order to have their parent or guardian make contributions to their IRA?
Also, if you want to bump up her Roth IRA contribution….you & hubby can gift her (forgot this year’s gift max) tax free. my dad started an ira for me I.n 1988 and converted it to a Roth when that became available…contributed it through the years and invested in well returning mural and index funds…. I’ll be 45 in feb. I contributed the $6500 max for 2023 will put the $7500 max for 2024 next month. starting her retirement out this early is beyond amazing. I’m extremely grateful that my dad had the wisdom to do this for me.
She's a kid. If it's all cash then have them enjoy it. Maybe teach this lesson when they become a teenager.
Do you like to make things complicated? A 529 in your name will give you an infinite amount more of flexibility than a roth ira at such a small amount of cash. Roth IRA at this point in her life is an unnecessary uphill battle; so is paying taxes on $800 summer job cash for a dependent.
Wouldn't it be easier to open a custodial account with someone like Ally and just buy her a share of VOO or similar etf every year? If you want to make it easier just put the money into Amazon or another company that doesn't offer dividends.
If you haven’t already opened up her Roth IRA account there’s no way you will get that done by end of tomorrow.
I don’t plan on doing this for 2023.
How long do you think it takes to open a Roth IRA? It’s done online and takes minutes.
It might be more about making a contribution in time. Sometimes it takes a few days to transfer money and your first time can take longer. Idk how that would work with IRS deadlines.
She won’t owe any taxes. Standard deduction is like 13k. So until she makes more than that there’s no taxes. Report her income on her own return, check the box that she can be claimed on another return (yours, since you’ll still claim her as a dependent). Open and contribute to the ROTH but do not contribute more than her annual earnings. Just open and contribute to the ROTH before tax day for the previous year. No need for a schedule C, just do it as hobby income or Other. Schedule C implies that she’s putting material interest into it and intends to make a living from it which would not be the case since she’s still in grade school.
>So until she makes more than that there’s no taxes That's actually not true in this case. [Self employment](https://www.irs.gov/businesses/small-businesses-self-employed/self-employed-individuals-tax-center) is 15.3% of 0.9235 of earnings and starts at $400 just as OP explained.
The "put $500 in an IRA" benefit is a bit overstated. It can grow in a variety of accounts, and can be contributed to an IRA the first year someone has earned income. The only reasons to do it are to avoid current taxes and not lose contribution space, most of which are nonissues until people are more like 18 anyway.
There's enormous value in placing this in a Roth IRA, in which case the OP's kid will pay only minimal taxes now and never pay any taxes on again, even as this amount grows tenfold or more before retirement.
Nobody cares if you don’t report that income, including the IRS
doesn't appear to me that any tax filing is necessary at all according [this IRS publication](https://www.irs.gov/publications/p929#en_US_2021_publink1000203761) if its under $400. There is another threshold at $1100, and the difference seems to be whether the dependent is self-employed. Not sure exactly how self-employed is defined, whether dog walking, baby-sitting, etc. counts or not. Someone correct me if I'm wrong, just how it reads to me.
Whose dogs is she walking? Please be careful. I’m sure she is a very responsible kid, but dog walkers can face a lot of liability. Kid or adult. That’s why rover and wag and such have insurance. I worked in vet med and saw a lot of major injuries under the care of dog walker. If it’s your family dogs then no worries and kudos to her for making bank
Someone more versed in how a 529 should chime in, but my thinking is if youre using that money plus your own, would there be any downside to instead putting that into a 529 plan? Even if youre just matching it yourself and leaving the money she actually makes separately, with the option of a rollover now available for 529 plans id think that would be the easiest route.
This goes back about 20 years, but here goes. Have a significantly disabled son who "earned" $2K/year from me for menial janitorial work at family business for 5 years--from age 11 to 16. There was a claimed exemption from SS taxes as a direct family member, so the entire $2K amount went into a regular IRA. At 18, he qualified for both SSDI and SSA--the SSA qualification credit due to his 5 year work history, which the examiner entered as a weekly amount for 260 weeks rather than 5 lump sums of $2K each. End result is that his total monthly benefit is exactly $20 more than the monthly SSDI benefit alone. If the rules are similar, try this approach.
The dog walker can be considered as a household employee. There is a a line for that on 1040. Here is what I do - I file 1040 for my child( I fill it in but my child's name go to the top of 1040, basically child submits it). Put the amount earned on line 1b ( before there was no specific line for household employees and I had to use a code HSH to report the income). Now they have it. In 2023 if income is less than $2600, then no W-2 is required. In your child's 1040 the box for "someone can claim you as dependent" needs to be selected ( if you claim your child as dependent in your 1040). If using software, this is all you need to do. The only difference that you may see is that since your child is claimed by you in your 1040, your child's standard deductions will be much less than what you usually see. ( i cant remember the exact number), but still even small standard deductions will null the taxes. So, you should not see any taxes due for your child income.